Ex-MIT Professor, Son to Plead Guilty in Hedge Fund Scam 

A former Massachusetts Institute of Technology professor and his son agreed to plead guilty to running a $500 million hedge-fund scam that was uncovered by investigators probing Bernard Madoff’s Ponzi scheme.

Gabriel Bitran, who was a professor and associate dean at MIT’s Sloan School of Management, and his son, Marco, pursued investors to GMB Capital Management LLC with fake claims of success in managing family and friends’ accounts using a trading model based on the father’s research, according to a copy of a charging document provided by federal prosecutors in Boston.

The men, who raised more than $500 million from 2005 to 2011, meanwhile put money into “funds of funds,” which rely on investments by other hedge funds, and fed money to Madoff’s firm and Madoff feeder funds, according to prosecutors.

The Bitrans’ funds suffered losses of more than $140 million. The men paid themselves as much as $16 million in management fees over the life of the businesses and recovered $12 million of their own investments when the funds were doing poorly, the U.S. said, adding that the two discussed their scheme in e-mail exchanges.

In 2012, the Bitrans agreed to pay $4.8 million to settle U.S. Securities and Exchange Commission claims that they lied to investors about their track record.

Each will plead guilty to one count of conspiracy to commit securities fraud, wire fraud and falsify documents and face a maximum sentence of five years in prison, according to agreements with prosecutors.

The case is U.S. v. Bitran, U.S. District Court, District of Massachusetts (Boston).

 

Source: bloomberg

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